The Dark Side of AI in Contract Management: How to Avoid Ethical and Social Risks

Artificial intelligence (AI) has infiltrated every facet of modern business, with the promise of efficiency, accuracy, cost reduction, and more. However, the allure of AI-powered contract management may mask a darker side—one rife with ethical and social implications that deserve careful consideration. Beyond the streamlined workflows, automated clause extraction, and other features lies a complex web of potential pitfalls. Let’s explore these challenging implications of AI in contract management.

Promise vs. Bias: A Dichotomy of Efficiency

AI in contract management offers clear advantages. Contract intelligence can uncover business insights that would otherwise remain hidden. Natural language processing (NLP) can automate the extraction of key terms, dates, and more—reducing manual effort and minimizing human error. This efficiency translates into faster turnaround times and reduces operational overhead.

However, this efficiency can come at a price.

One of the most pressing concerns about AI efficiency is the potential for algorithmic bias. Since AI models are trained on historical data, they may reflect existing societal biases. If the data used to train a contract artificial intelligence engine is biased, then the system may perpetuate or even amplify those biases, leading to discriminatory outcomes. For instance, a contract intelligence engine may consistently flag contracts from specific demographics or industries as high risk—even if there is no objective justification.

The Human Element: Lost in the Algorithm?

Contract management is not merely a technical exercise, but a deeply human endeavor. It involves face-to-face (or virtually so) negotiation, relationship building and maintenance, and nuanced decision-making. Artificial intelligence in its current form cannot replicate these essential human qualities. As such, an over-reliance on AI-driven contract analytics can lead to the devaluation of human expertise. Experienced contract managers might find their roles diminished and replaced by algorithms that prioritize speed over wisdom.

Additionally, a lack of transparency regarding the specifics of AI-powered decision-making can create a “black box” effect. In other words, when contract AI flags a contract as high-risk, it may be difficult to understand why or the reasoning behind the decision. This lack of transparency can erode trust and make it difficult to challenge potentially biased or incorrect outcomes correctly.

Job Displacement: A Looming Reality

The automation capabilities of artificial intelligence give rise to job displacement concerns time and again. Although AI does not entirely replace contract managers, it nevertheless brings with it the forced evolution of their roles. Routine tasks, such as contract review and data extraction, are automated, giving managers more time for strategic decision making. To make this transition, heavy upskilling and reskilling may be required. To that end, not all contract managers are likely to rise to the occasion in some circumstances.

The impact of this job displacement can extend beyond individual jobs; rather, it can have wider societal implications, paving the way to further income inequality and contributing to unrest.  Companies must proactively address these concerns with training programs and strategies for responsible implementation of contract artificial intelligence that prioritizes legal professionals’ well-being.

Ethical Considerations: Beyond the Bottom Line

Beyond the more practical and material concerns of bias and job replacement, AI in contract management raises fundamental ethical questions. Who is responsible when AI-driven contract management leads to a negative outcome, such as in negotiation? How do we ensure that contract intelligence engines are used ethically and responsibly?

This issue of accountability is complicated. If an AI contract management system commits an error to the point of causing financial loss or legal liability, who will be responsible? Is it the developer, the company that deployed it, or the contract manager who utilized it?

Another problem is that the current lack of definite legal and regulatory parameters for AI makes assigning responsibility almost impossible. More daunting is that the possibility of misuse is a concern: AI-powered contract management software could be turned to take advantage of loopholes, be manipulated in terms, or give unfair advantages in contract negotiations. To ensure that AI is used in a responsible way requires commitment to transparency and accountability.

Navigating the Future: A Call for Responsible Contract AI Implementation

The dark side of AI in contract management is not insurmountable. On the contrary—by acknowledging ethical and social implications while taking proactive steps to mitigate them—we can harness the power of AI for positive outcomes. We should:

• Prioritize ethical development of contract AI
• Emphasize human oversight
• Invest in training and reskilling
• Develop clear legal and regulatory frameworks
• Foster open dialogue and collaboration

The present and future of contract management will surely be shaped by artificial intelligence. However, we must ensure that this transformation is guided by principles of ethics and commitment to the human business experience. By embracing responsible approaches to AI implementation, we can unlock the full potential of this powerful technology while mitigating its darker side.